Suchergebnisse

AbstractAgency conflicts inherent in securitization are viewed as having been a key contributor to the recent financial crisis. A review of empirical research for the U.S. home mortgage market suggests that the problem may not have been securitization itself, but rather the origination and distribution of observably riskier loans. Low‐documentation mortgages, for which asymmetric information problems are acute, performed especially poorly during the crisis. Low‐documentation mortgages performed better when included in deals where issuers were affiliated with lenders or had reputational capital at stake. Investors priced low‐documentation loan risk via higher required equity tranches and security yields.

This paper examines the role of the Federal Home Loan Bank (FHLB) System in the U.S. housing finance system. This cooperatively owned government-sponsored enterprise has changed markedly over the past 25 years as a result of membership liberalization and the demise of thrift institutions. Today, despite its name, size, and principal activities, the FHLB System actually provides little targeted support to the housing sector. Instead, recent research highlights the role of the FHLB System as a provider of subsidized general liquidity to its members, including the very largest commercial banking organizations. This role was especially pronounced during the onset of the recent financial crisis and gave rise to the perception of the FHLB System as having become the "lender of next-to-last-resort."

In response to the wave of residential mortgage foreclosures in the past few years, federal, state and local government intervention programs have aimed to reduce the presumed social costs of foreclosures. Before the recent crisis, there was little economic research documenting foreclosure spillover effects. This article takes a critical look at the recent literature that seeks to estimate the negative effects of residential mortgage foreclosures. This review suggests that foreclosed properties sell at a discount, likely because such properties are in worse condition than surrounding properties. What's more, very nearby foreclosures appear to depress the sales prices of nondistressed properties, but this effect diminishes rapidly over physical distance and time. The author suggests that the considerable variation in foreclosure discount and spillover estimates that occurs from study to study may be related to data limitations (specific places and times) and poorly specified empirical models in some studies. He notes that studies using a repeat-sales approach seem to hold greater promise than those using hedonic regressions; the former approach is more likely to hold property and neighborhood characteristics constant and make it easier to examine multiple geographies and longer time periods.

Fannie Mae and Freddie Mac are government-sponsored enterprises that play a central role in U.S. residential mortgage markets. In recent years, policymakers became increasingly concerned about the size and risk-taking incentives of these two institutions. In September 2008, the federal government intervened to stabilize Fannie Mae and Freddie Mac in an effort to ensure the reliability of residential mortgage finance in the wake of the subprime mortgage crisis. This paper describes the sources of financial distress at Fannie Mae and Freddie Mac, outlines the measures taken by the federal government, and presents some evidence about the effectiveness of these actions. Looking ahead, policymakers will need to consider the future of Fannie Mae and Freddie Mac as well as the appropriate scope of public sector activities in primary and secondary mortgage markets.